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Friday, August 31, 2018 by Chad Swiatecki

Council approves plan to revamp incentives, with small businesses in mind

City Council voted Thursday to approve the framework for a restructuring of the city’s economic incentives programs, with the goal of increasing small business growth and improving job opportunities for lower-wage and middle-skill workers.

The 9-1 vote saw Council Member Ellen Troxclair object, with Council Member Alison Alter absent, to the package of three resolutions. The city’s Economic Development Department began working last year on revising the city’s incentives, or Chapter 380 agreements as they are spelled out in the state law allowing cities to create measures to encourage business growth.

For more than a decade the city’s incentives were geared specifically toward attracting large employers planning to build corporate campuses and bring hundreds of high-paying jobs. That strategy was needed following the early 2000s tech crash and helped lure companies such as Apple and Samsung to Austin to fuel an economic recovery.

However, many city leaders in recent years have expressed concern that those programs worked too well, flooding the city with six-figure tech workers but neglecting the need of longtime natives and marginalized communities to earn more as the local cost of living increased dramatically.

Months of community workshops gathered input from residents and community groups about how to attract and grow small businesses through a combination of tax breaks, direct payments, or reimbursements for the costs of job training and hiring and other economic tools.

Thursday’s approval sets the table for the final package to be written and formally adopted before it can be put into action.

A package of 20 amendments offered in recent days made small tweaks to wording of the various provisions of the package. Eighteen of those were added without objection. One amendment from Council Member Greg Casar that stipulated the higher amount for a living wage minimum of $15 per hour or the median hourly wage for the position be required for incentivized businesses passed 9-1, with Troxclair voting against and Alter absent.

Another amendment from staff that would have adjusted some language encouraging incentivized businesses to make purchases from women- or minority-owned businesses was dropped.

There were also adjustments made to the location bonus scoring system at the urging of Council Member Delia Garza, who pushed to make companies moving into downtown less of a favored scenario so there would be more encouragement to prioritize those locating in the areas identified as future job centers in Imagine Austin.

Council Member Ann Kitchen said Council shouldn’t entertain any attempt to eliminate the living wage language in the new package.

“We can always say it’s easier to create jobs if we pay people less,” she said. “We don’t want to go down that road. We have to set a minimum and that’s the standard. I’m really not open to someone saying we could create more opportunities or that there would be more jobs if we paid people less.”

The new incentives will likely link up with other county and area programs already at work to train former felons, military veterans, the disabled and other groups generally categorized as “hard to employ” so they can find well-paying jobs.

“It is our belief that the city’s economic development expansion plan … clearly aligns with the work we do here in Central Texas,” said Kevin Brackmeyer, executive director of Skillpoint Alliance. “By providing incentives that we believe would be instrumental in encouraging employers to collaborate, we believe it will create entry-level pathways for hard-to-employ populations and could ultimately lead to higher-paying middle-skill jobs.”

Troxclair’s objections included references to a recent audit that found the city has performed poorly in executing and monitoring previous workforce development programs. She also said the area’s low unemployment rate and strong economy make any incentives programs at all mostly unnecessary.

“The purpose of economic incentives are to stabilize our economy and grow our economy. And what started out as a way to include small businesses that are already in Austin in our incentive programs that we have historically given to large companies … has turned into a workforce development program,” she said.

“There’s a place for workforce development programs, but it seems like we are using the wrong vehicle to get there. It doesn’t seem like this is the vehicle for us to help the people who want to get jobs and find good-paying jobs, or accomplish what I think economic development programs are supposed to do to grow our economy.”

Photo by User:Argash [GFDL or CC BY-SA 3.0], via Wikimedia Commons.

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Key Players & Topics In This Article

Austin City Council: The Austin City Council is the body with legislative purview over the City of Austin. It offers policy direction, while the office of the City Manager implements administrative actions based on those policies. Until 2012, the body contained seven members, including the city's Mayor, all elected at-large. In 2012, City of Austin residents voted to change that system and now 10 members of the Council are elected based on geographic districts. The Mayor continues to be elected at-large.

Economic Development Incentives: This is shorthand for a series of programs designed to lure business to a given region. In Austin, the program tends to take some form of tax-based incentives. These can include rebates or grants that are often tied to a set of stipulations. These tend to include local hiring goals, same-sex partner benefits, or, more recently, wage floors for construction workers who build facilities for the incoming organizations.

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